Business Plans – External and Internal Plans Get You Different Benefits

Broadly, there are two types of business plans. These are external business plans and internal business plans. An external business plan is focused on parties that are outside your business. An internal business plan is, broadly, only for the eyes of those people who work within the business. Here is a brief summary of the differences.

External business plans

When a business plan is prepared for an external party, it should be focused on what the external party requires. Very often external business plans are prepared for people who are providing capital or finance to the business. However, this may not be the only reason. You may need to prepare a business plan for a community organisation or a council so that it outlines the impact of your business on the community. This will have a different focus to a plan that is prepared for a financier.

More specifically, external business plans are often prepared for parties that you would like to invest in your company. If you are preparing a plan for an investor of this category, you need to think clearly about what that investor wants to see in your plan. If it is at all possible, ask questions and understand exactly what the investor wants to see. Leaving this to chance is often a fatal mistake. Don’t try to guess the needs of your reader. Find out.

I would also warn you about putting too much detail in an external business plan. Keep it to the point and keep it focused. Don’t stray into reams of detail on the chance that your reader wants to know this. Further detail can be supplied at a later time. However, if your reader wants the detail, go ahead and write all the pages that you need.

In the opinion of some commentators, the executive summary carries about 95% of the importance to the reader. I think this is a bit overstated, but it is important that your executive summary outline very clearly the benefits to the reader. Your executive summary answers the question “Why should I read this plan?” So make sure you get the “What’s in it for me?” points into the executive summary.

Internal business plans

On balance, I think internal business plans are the most important. This is a document that dries your business forward. An internal business plan summarises what you and your team are actually going to do to improve your business and achieve your goals. No one need see what is written in this plan except those people who are directly involved in carrying out the plan. You may choose to show it to a wider readership, but that is your choice.

While the internal business plan will contain elements of what is in an external plan, the internal plan will be solely focused on trying to achieve the goals of the owners of the enterprise. What are the precise financial goals? How many locations will you operate from in five years time? When will the business be sold? How will production efficiency be improved by 15%? How many people will you employ at the end of next year? And so forth.

In my view, an internal business plan is only of use if specific tasks are assigned to specific people to be achieved by a specific time. Also, there must be constant follow-up of these goals. No progress is made until people know exactly what they have to do and by what time and they need to be accountable to the plan.

Another aspect of an internal business plan is that it will (and should) change. The world changes rapidly. Your industry changes rapidly. People come and people go. Opportunities arise and projects fail. Your internal business plan should not be a document that is visited once per year. Internal business plans that are reviewed that frequently usually sit in the bottom of someone’s drawer and don’t have any impact on the organisation. The internal business plan should be examined at least once per month.